The dollar index (DXY00) today fell from a 5.5-month high and is down by -0.04%. The dollar whipsawed lower today after US Sep nonfarm payrolls rose more than expected but the Sep unemployment rate unexpectedly ticked up to a nearly 4-year high, bolstering expectations that the Fed may still cut interest rates at next month’s FOMC meeting. Other US economic news today was mixed for the dollar as weekly jobless claims fell more than expected, the Nov Philadelphia Fed business outlook survey rose less than expected, and Oct existing home sales rose to an 8-month high.
US weekly initial unemployment claims fell by -8,000 to 220,000, showing a stronger labor market than expectations of 227,000. However, weekly continuing claims rose to 1.974 million, the most in four years, and a sign that those currently laid off are finding it challenging to secure new employment.
US Sep nonfarm payrolls rose by +119,000, showing a stronger labor market than expectations of +51,000. The Sep unemployment rate unexpectedly rose by +0.1 to a nearly four-year high of 4.4%, showing a weaker labor market than expectations of no change at 4.3%.
US Sep average hourly earnings remained unchanged from Aug at +3.8% y/y, stronger than expectations of +3.7% y/y.
The US Nov Philadelphia Fed business outlook survey rose +11.1 to -1.7, weaker than expectations of +1.0.
US Oct existing home sales rose +1.2% m/m to an 8-month high of 4.10 million, stronger than expectations of 4.08 million.
Comments today from Cleveland Fed President Beth Hammack were hawkish and supportive of the dollar when she said, “Lowering interest rates to support the labor market risks prolonging this period of elevated inflation, and it could also encourage risk-taking in financial markets.”
The markets are discounting a 39% chance that the FOMC will cut the fed funds target range by 25 bp at the next FOMC meeting on December 9-10.
EUR/USD (^EURUSD) today fell by -0.04% and posted a 2-week low. The euro is slightly lower today from a weaker-than-expected report on the Eurozone Nov consumer confidence index. Losses in the euro are limited due to central bank divergence, with the ECB seen as largely finished with its rate-cut cycle, while the Fed is expected to cut rates several more times by the end of 2026.
The Eurozone Nov consumer confidence index was unchanged at -14.2, below expectations of a rise to -14.0.
German Oct PPI fell -1.8% y/y, weaker than expectations of -1.7% y/y.
ECB Governing Council member Makhlouf said Eurozone interest rates are in a “good place” and that he’d “need to see pretty compelling evidence to move.”
Swaps are pricing in a 2% chance of a -25 bp rate cut by the ECB at the December 18 policy meeting.
USD/JPY (^USDJPY) today is up by +0.42%. The yen added to this week’s losses and posted a 10-month low today against the dollar. Concerns about Japan’s debt burden are weighing on the yen after Bloomberg reported that Japanese Prime Minister Takaichi will unveil a 17.7 trillion yen ($112 billion) stimulus package, higher than the 13.9 trillion yen package released last year by former Prime Minister Ishiba.
Higher Japanese government bond yields are supportive of the yen after the 10-year JGB yield rose to a 17-year high of 1.845% today. Also, hawkish comments today from BOJ board member Koeda were supportive of the yen when she said, “Given that real interest rates are currently at significantly low levels, I believe that the BOJ needs to proceed with interest rate normalization.”
The markets are discounting an 18% chance of a BOJ rate hike at the next policy meeting on December 19.
December COMEX gold (GCZ25) today is up +4.10 (+0.10%), and December COMEX silver (SIZ25) is up +0.091 (+0.17%).
Gold and silver prices rebounded from early losses and are slightly higher after the US Sep unemployment rate unexpectedly ticked up to a nearly 4-year high and weekly continuing unemployment claims rose to a 4-year high, signaling weakness in the labor market and dovish for Fed policy. Precious metals continue to have some underlying safe-haven demand amid uncertainty over US tariffs, geopolitical risks, central bank buying, and political pressure on the Fed’s independence.
Precious metals initially moved lower today on negative carryover from Wednesday when the Bureau of Labor Statistics (BLS) canceled the publication of the Oct employment report, which removes key data before next month’s FOMC meeting and lowered the chances of a Fed rate cut. Also, today’s sharp rally in stocks has reduced safe-haven demand for precious metals. In addition, easing inflation expectations curbs demand for gold as an inflation hedge, as the 10-year breakeven inflation rate today fell to a 4-week low of 2.267%.
Strong central bank demand for gold is supportive of prices, following the most recent news that showed bullion held in China’s PBOC reserves rose to 74.09 million troy ounces in October, the twelfth consecutive month the PBOC has boosted its gold reserves. Also, the World Gold Council recently reported that global central banks purchased 220 MT of gold in Q3, up 28% from Q2.
Since posting record highs in mid-October, long liquidation pressures have weighed on precious metals prices. Holdings in gold and silver ETFs have recently fallen after posting 3-year highs on October 21.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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